The Daily Mail is reporting that George Osborne will accept a recommendation from John Redwood that inheritance tax on the main family home should be scrapped.

A Tory source told The Mail:

"The tax penalises people who save for their future. We want to send a signal, particularly to those in London hit hard by this, that we will act. The people who will benefit the most will be young people who will not have to pay tax on their parents’ estates."

The devil will be in the detail of Mr Osborne’s response to Mr Redwood, however. George Osborne has said that there will be no "up front, unfunded tax reductions" promised before the next election. It may be that the Shadow Chancellor will undertake to abolish the tax on the main family home as and when resources allow him to do so. Inheritance tax was the second most unpopular tax in a survey for The TaxPayers’ Alliance last year.

5.35pm response from the TaxPayers’ Alliance: "This announcement from John Redwood is very encouraging because it shows that the Conservatives are starting to understand that Britain’s growing tax burden is hitting families as well as businesses. The proposal is not a complete abolition of Inheritance Tax but, by excluding the main home, it will go a long way towards addressing the injustice of the death tax faced by millions of ordinary families across the country. Hopefully David Cameron will listen to John Redwood and commit the Conservatives to this proposal. Congratulations to the Economic Competitiveness Commission and Lord Forsyth’s Tax Reform Commission, which first came up with the policy."

6pm: The story is actually from Paul Waugh of the London Evening Standard. Owned by the same group, Standard stories often appear as Mail stories online.